Why are they allowing this? It stems from the decline of pension plans. Annuities are essentially pensions, but companies and govt (understandably) no longer want to have that liability on their books, nor do they want to be responsible for them. They’re trying to make it easier and more cost effective to lock in lifetime income for the average retiree.
My girlfriend was recently offered this opportunity. She was capped out for her 401k for an assine rule, so the company offered her a deferred annuity through payroll which will allow for her to receive a certain amount of income for life starting at the age of 50. This is a highly attractive proposition for many people.